Monday, December 31, 2012

Explosive Upside

When will the Bears learn, right? Fake out move from Friday (futures -26) will leave some UBER or NEWBIE Bears licking their wounds.

Why would the market rocket? Light volume, and the cliff has been spoken so many times, fiscalclifffiscalclifffiscalcliff......that it doesn't mean anything anymore.

Know what does matter? Impression that traders have and constantly repeat "Fed has this thing BACK STOPPED, there is no other game in town for returns with interest rates near zero. There is little downside to worry about, China is improving....real estate is improving...etc etc"

I have not heard heard from ANY noted stock gurus except the Prechter's stuck on doom and gloom (not me of course!) prognostication where there is much to fear from being fully invested. And I have heard many on the "shows" hair cafe' and Bloomberg discuss high beta risk on sectors the way to go, not defensive.

Where is the road less traveled and when is it good to have everyone pile onto the same end of the investment ship? (TITANIC?)

For now, sip your Mia Tia's put your feet up and enjoy the Bull ride, bumpy or not.....don't look in the mirror, fear the future of the man behind the curtain, and don't worry about the cliff or even the hill.....they got your back stop....until they don't.

D

Saturday, December 29, 2012

"2012 YEAR IN REVIEW"



 

What JUMPS off these pages to me,  is how "US leveraged loans jumped 24% from 2011 to $465bn, lending volumes below only 2006 and 2007 levels"  "Sales of high yield bonds $354bn jumped 23% above previous 2010 record" This refers to high yield (JUNK) bonds I suppose.

Global corp bond sales surpass previous 2009 record and so on.

What is going on is unprecedented, and under NORMAL circumstances should have ignited an inflationary spiral the likes we've never seen. That just hasn't been so as of yet......end demand is NOT THERE and capacity is WELL below smoking.....are we not in the clutches of a DEFLATIONARY SPIRAL the likes of which we cannot escape, and where bonds will continue to outperform?

Here , where not enough jobs are being created, and corporate profits and contracting from (record levels?), the markets have surely decoupled from fundamentals. Unless long term investors believe in unlimited CB support, that will finally win the day, it would seem the prudent thing to do is prepare for the worst outcome imaginable.

D

Friday, December 28, 2012

AS THE FISCAL CLIFF WORM TURNS

WASHINGTON (AP) — A person familiar with the details says President Barack Obama is not making a new 'fiscal cliff' offer at his high-stakes meeting with congressional leaders at the White House.
Obama instead is spelling out again a plan he says can pass the House and Senate, said the source, who spoke on condition of anonymity because he was unauthorized to speak publicly about the private meeting.
Obama wants a bill to halt looming tax increases on all families making $250,000 a year or less and would extend unemployment insurance to many people about to lose it. His proposal would also cover other issues as the Jan. 1 deadline nears.
If he does not get a counter proposal that can pass both chambers, Obama will press for a straight up-or-down vote on his idea, the source said.

The SPX fell 15 points today from hwere it was near flat before the 3 PM talks began.
http://www.cnbc.com/id/17689937 SPX futures currently down another -24 AH

D

CONSUMER CONFIDENCE

Reading is about half where it should be after 4 years of recovery. We sit near 60 which is the lowest reading since 2002 fear lows.

D

Thursday, December 27, 2012

THE NEW BUBBLE ECONOMY

Twice in the last 10 years the Government and the Federal reserve system deemed it an emergency to help bail out the US and economy, each time more dramatic efforts were undertaken to resuscitate an ailing economy and monetary system.

Y2K was the first scare and because of the actions of the federal reserve, we had an explosion of asset prices in the tech sector and then in 2000 that bubble popped from excessive risk taking and exhaustion.

The ensuing Recession would have been rather mild, did not include the Banking Sector, and would have passed on it's own. However, the FED in 2001- 2003 began to force interest rates lower as the Fed Funds rate fell to 1%, 911 was also used as an excuse.

What ensued was an EXPLOSION of home buying that quickly pulled the stock market to new highs and the economy ran with it. But for some reason, no one was looking at the INSANE speculation, flipping and building that was taking place? Prices for homes, even those not yet constructed rose at the speed of light, it seemed like everyone was getting in on the action. THEN...POP went that weasel.

Instead of a reasonably mild recovery from the tech bubble bursting, we now had a FINANCIAL/BANKING SECTOR FIASCO, that threatened our economic system to the core. WHO among our leaders other than Ron Paul, asked what role the Federal Reserves 1% interest rate policy and those in charge of protecting us from the abject wild speculation that followed?

Our Gov't INSISTED banks make loans to those less fortunate, minorities and the like, that home loans be made to them.What followed were piggyback loans and liar loans, no doc loans.....anyone with a face could get a home loan......money was SO CHEAP.....the High School janitors formed clubs to flip condos.....prices went to the moon.

But guess what, the avg Joe, the working schmo also needed housing, families wanted to buy their dream homes, and even though some prices had DOUBLED in 3-4 short years, with rates SO LOW.....people bought in droves.

Then as ALL BUBBLE DO, the housing bubble popped. BUT this time, even after the amazing BIG BEN BERNANKE when asked if he was worried about the housing situation in 2008, replied " ME WORRY? HOUSING HAS NEVER FELL IN VALUE YR/YR"

Guess what, Housing fell YR/YR, and those innocents along with the speculators were trapped. PRICES FELL and have fallen by more than 40% in some areas, recovering lately only slightly. Now 25% of those who won homes find themselves underwater, their homes worth less than what paid.

NOW, the FED has lowered FED FUNDS RATE TO 0%, and it has stayed there for 4 years!!! YES a group of a few men, one in particular have control of the world's interest rates. If 1% brought us the last CRISIS, what will 4 PLUS YEARS OF 0% BRING US?

 They have targeted illegally, and have openly targeted ASSET PRICES for appreciation. Guess what it has worked, the market more than doubling off the 2009 lows in Historic, dramatic fashion. THESE ACTIONS WILL, HAVE LED to the forming of another more dangerous bubble, a BOND/ GOV'T DEBT BUBBLE and another ASSET BUBBLE, A PREFERRED STOCK BUBBLE.....

People have been FORCED INTO RISKY ASSETS because their savings, the BEDROCK on investment give them 0% returns. NO ONE can live off interest paid on savings.

This I find VERY worrisome. We have a herd mentality in the stock market, people have been left with little other choices to gain a return, any return on their hard earned after tax incomes.

In the meantime, back at the ranch, our Government seems to have access to free money paying as little as 1.6% for 10 years and can borrow into the tsratosphere with ever widening federal deficits current and future piling so high each year equal or greater than 10% of our entire GDP and accumulating current deficits nearing 100% of GDP. But don't worry, long term rates are still near 1.7%.....this could go on forever......

But now we reach the Fiscal CLiff, or so it seems, between rock and hard place. DO we have Gov't spending cuts or raising taxes or both?

To attract investors companies have raised their dividends adn many like APPLE have begun paying one, this diverts investment into Capital equipment and research and investment, which help drive earnings and hiring, all GOOD for the economy.

Companies are not hiring like they used to, there is great uncertainty in the land, worry about the Health care law, raising the cost of workers, and what the coming policy changes will do to business. We head into 2013 with a lot of unsettled things and US deficits soaring above $1 TRILLION a year.

LOTS OF US $'s have to be minted, new $'s can be created of less value (or no value) to pay off the OLD DEBTS when the same $'s had more value, as their were less of them.

YOU CANNOT keep up with this printing, devaluing. What you have been forced to do is almost anything for a return on your money, and for now that means the stock market.

No one else finds this troublesome? Markets can function and cleanse themselves, reset when mostly left alone, then when it gets fiddled with those adjustments, malinvestments become MUCH LARGER to deal with, we are in uncharted territory.

That doesn't seem to keep Ben Bernanke up at night, when this one pops, the fingers will go a pointing, but no one will be charged, no one will pay the price except the avg American who will be left with the price tag and the consequences.

What debt have you ever had, where you can just keep getting new loans to pay for the old ones? What debt do you have where you never have to pay it back?

Our Governemnt is acting as if HISTORIC LOW interest rates to fund it's debt will go on forever, what happens if the cost of funding this never ending debt goes up?

They cannot collect fromt hose who cannot pay, so whoever is left standing will be the target of their attention, and its now just begun.

The economy cannot function without 0% FED interest rates? for 4 years and counting?

Something is very wrong, any solution might get hyped, but I guarantee it will be LIP SERVICE to the real issues and problems, another kicking of the can, it will address next to nothing in the NEAR TERM, and offer MINIMUM solutions spread out over 10 years or more that do nothing to REDUCE the ACCUMULATING DEFICITS, but might take a nip at todays.

That's why I think corporate profits appear to have peaked, may be on the contraction slide of things going forward, other than 0% returns on savings, what LURE for new money will there be for the stock market?

ALL Bull Markets end, some last longer than others, in 1980 we began a 20 year bull market, some argue with a higher high, it ran until 2007, if we have a higher high now then what? But we ALSO made A LOWER LOW in 2009 vs 2003.

If we are in the latter stages of a game of MUSICAL CHAIRS, who wants to be late trying to get out the door to safety, or am I a BEAR crying wolf one too many times for anyone to listen to, or consider what I am suggesting COULD be what is in our future?

If you think you are diversified, and won't worry over a 40% or more haircut, and can hold until prices reach for a new high once again......if we all live long enough....probably true, the market in the LONG RUN seems to always go higher....also remember the ensuing BEAR MKT will take 2/3 as long to work itself out as the previous BULL MKT.....does that put us at an ultimate bottom in year 2016? *(and how does the man on street feel when not one person has been indicted for the worst financial crisis in history? the rich have gotten much more so during the last 3 years...and the rest of us, thenot so connected and well off?)

WE WILL rise again, and it will be glorious, but IMHO we have not purged our system, we have NOT corrected the wrongs, but only added to them and we are at the MERCY of the FED and maybe one man, in his wild historic gamble on monetary policy and Fed actions.

Duratek

Saturday, December 22, 2012

WE ARE INCHING CLOSER TO THE BEAR PIT

Most intelligent writer we are lucky to have access to Doug Noland
http://www.safehaven.com/article/28169/recalling-john-law

"I included the above quotes back in a March 2000 CBB titled, "John Law and Alan Greenspan - The Great Inflationists." I could not have imagined at the time that his successor would make Mr. Greenspan appear a most responsible central banker. The monetary theorist John Law introduced paper money to France in the early eighteenth century. As an historic monetary expansion and speculative Bubble ensued, Mr. Law was revered. But when he lost control of the experiment - when his Mississippi Bubble scheme and the French economy later collapsed - Law was run out of the country. The effects of this monetary fiasco lingered for decades. I have argued for years now that the U.S. and world are trapped in another historic monetary experiment run amuck. I believe this framework helps to explain a lot"

As our politicians argue, bargain on the "fiscal cliff" , we continue to hurtle towards the land of no return. The value of our currency is being debased by the continued running of the printing presses to just pay for the interest payments on the "CURRENT" accumulated debt, NOTHING to address total "unfunded" liabilities of SS and MC some say equal $70 TRILLION....not making this up.

SO as "THEY" the dumb and dumber crowd debate how to manage the coming CLIFF, at BEST all it will do is maybe put a cork in the $200B plus in interest payments alone that is part of budget. The military spending is 25% of total receipts coming in, we CANNOT continue down this path.

A debt is monies owed to someone, this is funded by floating notes, Treasury Bills, the FED prints money to buy most of these bills along with a willing, so far Foreign Gov't and investor contingent. Currently floated with historic low interest rates. Let the fun begin.....

See MUSICAL CHAIRS, HEAR THE MUSIC....the music will STOP....the HORDE will make for the exits....and there WILL ne a narrow opening.

You play long when the policies are in your favor, YES rates can continue low for ahwile longer, but at some point the trade of century will be SHORT TREASURIES, might be too early but after VOLKER crushed inflation by raising short term rates to near 18%..Bonds have been in Bull mkt ever since. NOTHING LAST FOREVER.

D

Wednesday, December 19, 2012

CLIFF: HYPE VS SUBSTANCE?

"But since Congress and the White House have waited until the last minute to negotiate, no one expects them to reach a grand bargain with all the details hammered out."

http://money.cnn.com/2012/12/19/news/economy/fiscal-cliff-budget-experts/index.html?iid=HP_Highlight

Sunday, December 16, 2012

ONLY BOZO'S ARE DRIVING THIS BUS!

http://www.safehaven.com/article/28066/the-us-continues-along-an-alarming-continuum

"Unfortunately, the piling of debt on top of debt can't continue to infinity. We have the locked-in, demographically driven cost increases associated with supporting the large entitlement programs of Social Security and Medicare. Then there's the hundreds of billions of dollars in bad debt bulging under the carpets in the Pension Benefit Guaranty Corporation (PBGC), the FHA, in student loans, the FDIC, etc., etc.
And sooner or later interest rates must begin to return to more normal levels (and probably well beyond). At which point the cost of servicing all the debt – currently about 6% of the US federal government's expenditures – will soar.
Simply, there is no denying that government is firmly caught in a trap from which there is no politically acceptable way to free itself. Thus, for the continuum to remain intact, expect the excess spending to continue and, in all likelihood, get worse."

Sunday, December 09, 2012

TRUTH ABOUT THE FISCAL CLIFF

http://www.safehaven.com/article/27966/us-debt-crisis

"The media, commentators, and politicians always talk about deficits. This whole fiscal-cliff debate centers around how to reduce the federal deficit. Should we cut government spending, raise taxes, or do both? But a deficit is merely the current shortfall, the government spending more in any given year than it takes in. The true problem lies in the past's accumulated deficits, which collectively add up to the national debt."

"The so-called fiscal cliff the United States now faces is an early milestone in this disastrous process. And sadly, every single major proposal on the table from both sides is a total joke."

Friends, it is my belief that we have the WINDS OF CHANGE blowing directly in front of us, and the fiscal cliff talks, news, etc are but just a smoke screen to the evolving issues that cannot be talked away.

Because of the Federal Reserve interest rate policies, going off the paper of their written official mandate, they have purposely and illegally targeted savers for destruction and pain, and the stock market for manipulation in a stupid attempt to AVOID the DAY OF RECKONING, and a lot of what has ACCUMULATED over the years is DIRECTLY brought about by their reckless interest rates policies, and now outright manipulation of the stock market.

Additional warning signs come from faltering corporate earnings where 63% S&P 500 companies missed estimates, looks like earnings have peaked this cycle. SO do you want to be invested in the stock market lock, stock and barrel because the FED has made sure that stocks are the only game in town?

Other warning signs show PEAK volume in stocks occurred in 2009 and have been falling ever since.

IMHO, we have a manipulated stock market targeted by the Federal Reserve as a way to attack current financial crisis, this is not a substantive, long term answer, and a dangerous one that might have horrible implications to those who remain intoxicated by the current results and LOW FEAR that exists, meaning complacency that current climate will not vanish before their eyes.

But isn't that what usually happens? SO we have a bunch of can kickers trying to solve a VERY complicated situation....good luck with that!

Duratek

Saturday, December 08, 2012

HOME MORTGAGE CREDIT CONTRACTS?

http://www.safehaven.com/article/27974/q3-2012-flow-of-funds

"From my analytical perspective, the SAAR $299bn contraction of Home Mortgage Credit was the biggest surprise for the quarter. This compares to Q2's $214bn contraction and Q3 2011's $200bn decline. With mortgage borrowing costs having taken another leg down to historic lows - and all the talk of an unfolding housing recovery - I was anticipating a return to positive mortgage Credit growth in Q3 or Q4. But, then again, with negative real returns on savings and such highly uncertain policy, market and economic backdrops, it remains perfectly rational to pay down mortgages and other borrowings. That extreme fiscal and monetary policy measures foster extraordinary uncertainty - thus incentivizing a cautious approach for many individuals and businesses - reminds one of the Law of Unintended Consequences. And a "fiscal cliff" compromise, while perhaps spurring the markets' speculative reflexes, would do little to resolve ongoing uncertainties."

Friday, December 07, 2012

MIXED SIGNALS?

I would just like to touch on today's labor report on jobs. Unemployment fell another .2% to 7.7%. On the surface this appears to be another sign of a strengthening economy, but it may not hold up under closer scrutiny.

The labor participation rate actually fell to one of the lowest readings since they have kept track of it, work week hours were unchanged and by now you would think Sandy is in the mix as to how it has impacted data.

Also there were so many revisions to the prior data, that I don't see how you can come away with any confidence in what the government data is saying or depicting.

The nascent housing recovery is bolstered by lowest lending rates in history, yet sakes are nowhere near their peaks. AT same time the price paid is to those who seek a fair return without risk, and there we have an nasty dilemma, you could have a $Million in saving at the bank or Money Market and barely make enough to make ONE TRIP TO THE GROCERY STORE.

The efforts of the FED, which are outside of its mandate, are to force investors into risky assets like the stock market and junk bonds. This has worked to raise prices of these assets and add to household wealth, but I think a good bit of this is in Retirement accounts, not liquid that would be spent into the economy.

What we have is an economy still 4 years after rates hit 0%, on LIFE SUPPORT. And IMHO these FED policies are adding to the already maladjusted and imbalanced economy, has destroyed the normal levels of investment in plant and equipment that help create lasting good paying jobs.

We have a SMOKE and MIRRORS recovery, that cannot sustain itself where the FED will raise rates even .25%.

Until we regain some balance, and where natural correction can be allowed to take place, more of the same is what we can expect,

The Fiscal Cliff makes for good debates, but even ANY agreement is going to kick that can far down the road and not make much of a difference.

Any substantial rise in tax rates, rise in costs to employers to hire and retain employees....will not go well for the economy and job market.

D

Thursday, November 29, 2012

WHAT IS BEING PEDDLED AS RECOVERY

 

Highlights


  • New home sales fell from a downwardly revised 369,000 (from 389,000) in September to 368,000 in October. The Briefing.com consensus pegged the number of new homes sold at 388,000.

Key Factors

  • It was disappointing to see such a stark downward revision to the September data. Even though the new housing market may not be as solid as once thought, the trends in the sector continue to be favorable.
  • A lack of inventories of distressed properties has limited the negative effect of foreclosures on existing home prices. That has caused existing home prices to increase over the past few months. As a result, the price premium between a new home and an existing home has shrunk considerably, making new homes relatively cheaper than before and in more demand.
  • Absolute inventory levels of new homes remain near historical lows. Builders will need to continue to boost production in order to meet the newfound demand.
  • Median new home prices increased 5.7% y/y to $237,700.
 
 
 
Consumer confidence current is at 60???? last recovery peaked at 140 !!! WTF are they peddling here as a recovery?
 
You can see above chart of housing, coud you choke somebody when they continue to chirp about this recovery?
 
Now headlines say every time a single word is uttered about the "FISCAL CLIFF" and a DEAL is near......is reason for stocks to rally. BS
It's the time of year.....stocks tend to be bullish end of year into XMAS.
 
The real trouble may not show until well into 2013....or who knows, maybe people wake up sooner.
 

D



Tuesday, November 27, 2012

FUTURE GROWTH PROSPECTS

The Five-Year Funk: OECD Slashes Global Growth Estimates

Breakout Three mediocre years after the last recession ended, one of the world's leading economic policy advisers is warning that another may be on the way, as dawdling leaders in Europe and the U.S. fail to deliver the comprehensive solutions needed to restore growth.

Saturday, November 24, 2012

DISTORTIONS TO A SOUND ECONOMY

"It is inaccurate to blame the 2008/09 financial crisis for the lagging U.S. recovery. Poor post-Bubble economic performance instead relates directly to previous boom-time excesses. And there should be little debate that loose Federal Reserve policies played prominently throughout the mortgage finance Bubble period. A system just doesn't almost double total outstanding mortgage Credit in about six years without unleashing major distortions in the allocation of resources and spending/investing patterns throughout the real economy. And surely no one can argue that four years of zero rates and massive federal deficit spending have fostered sound resource allocation and significant economic wealth-creating investment."
http://www.safehaven.com/article/27802/follwing-weidmann-lacker-takes-a-stand

Mis-allocation of resources, lack of real investment dollars, a fostering of more credit excesses in attempt to revive a financial mania, no wonder the economy is not creating enough jobs and wages continue to fall to stagnate, not keeping up with the rise in costs of things we need.

SOUND MONEY. Growth is fostered by sound money policies and rewards for real investment. With a ZERO FED interest rate policy, governments spending well beyond what they can afford to spend in efforts to revive the economy have not put us on a path to recovery.

A one sided approach will not bring us to a soft landing. The stock market being targeted by the FED specifically goes against their doctrine, but desperate times call for desperate measures?

D

Friday, November 23, 2012

Wednesday, November 21, 2012

ELEVATED CLAIMS

Revised up last report 20,000 more to 459,000, this week down to 410,000. Is this an abheration because of storm? WHERE then are the seasonal hires we expect this time of year? Have these figures been adjusted to reflect small business hiring that usually occurs this time of year whether it does or not?

D

Saturday, November 17, 2012

Excerpt from Doug Noland Essay "WHERE MONEY DIES"

"There was talk this week of the need for larger monthly QE from the Fed. The markets also anxiously await the firing up of Dr. Draghi's bazooka. A new Japanese government could see the Bank of Japan further crank up their white-hot electronic printing press. With new leadership in China, perhaps they'll be ready to push further on the accelerator. It all seems rather "late-cycle" to me. And, I'll suggest, a loss of confidence in all these electronic journal entries - the global financial system more generally - is this historic cycle's greatest vulnerability. As we witnessed not many years ago, one day everyone is so enjoying the dance party and the next they're fighting for the exits. It's a spiking the punch rather than removing the punchbowl dilemma."

http://www.safehaven.com/print/27730/when-money-dies  New home for Doug Noland

Thursday, November 15, 2012

JUMP IN UNEMPLOYMENT CLAIMS

A HUGE jump in claims to over 430,000 this week, much of this is blamed on Sandy weather event, but that was 3 weeks ago.

WMT posts LOWER revenues, another sign of the weakening Consumer, especially lower to middle class citizens.

Wages are still falling, another .2, couple with WMT data, it is pretty obvious the avg American is finding it harder and harder to keep up.

Europe declares another Recession. We have the FISCAL CLIFF worries, but with that being repeated every day, is that already reflected in stock prices?

The market is clearly oversold, so it's important to see if it can mount some kind of rally from exhausted sellers. I plan on CHARTING the action this weekend to show you what has been happening.

D

Wednesday, November 14, 2012

VIXEN

Similar complacency bottoming pattern to 2007 MARKET TOP. And IMHO that is where we are headed or already got there. It's amusing how the expert players come here and dis me for not seeing ONLY blue skies and forever BULL MKTS.....and more amusing when they scurry back under their rocks when the shit hit the fan....and I get accused of being a broken record?

Well, those who have been following me I've been writing ever since we began this SECULAR BEAR phase, so as far as I can see......we have piled more crap on top of existing crap and the natural balance of things has been fought tooth and claw, so things have not been allowed to go their course and then we heal.....the idiots have made it worse! FED IDIOTS caused the issues and have added insult to bloody injury....

We hear those cheers from those that like what has gone down the last 4 years, but and it's great that pre-existing conditions dont mean you cannot get insured, but NOWHERE in the 2500 pages of this monstrosity of a bill, does it do anything to help CONTAIN COSTS! Insurance companies will raise rates on all to cover the changes made in the bill.

The market is now a might bit oversold, so I expect a bounce of some kind to begin shortly. ALL you see are CLIFF CLIFF FISCAL CLIFF...ow ow ow. Just some of the problems ahead.
WHAT IF a cliff dive is averted? delayed? bulls and bear get trapped in this ugly mkt.

SEE you at SPX 800 or below.

D

Friday, November 09, 2012

Interesting chart from Zero Hedge

http://www.zerohedge.com/news/2012-11-09/most-important-chart-consider-weekend-or-tom-lees-nightmare

SUGAR HIGH?

"The stock market will suffer over the 12-month period, which always happens the year after an election," said Len Tannenbaum, CEO of Fifth Street Finance in New York.
Tannenbaum said the effects of the Federal Reserve's quantitative easing debt-buying program will fade this year after helping boost equity performance throughout Obama's first term.

"The market has been propped up by these sugar highs," he said. "QE half-trillion a year is not sustainable in the long run. The sugar high is going to end because Barack Obama is going to raise revenue and cut entitlements. The combination of the two cannot be good for the economy."
Indeed, economists have been busy cutting numbers for future growth in the wake of Hurricane Sandy as well as the drag effects from whatever solutions are devised to avoid the fiscal cliff.
Goldman Sachs on Wednesday cut its fourth-quarter gross domestic product forecast from 1.9 percent growth to 1.5 percent. The cuts were based on the likelihood that Obama will kill the George W. Bush-era tax cuts for those making above $250,000, and the drag that Superstorm Sandy will have on the economy."
http://finance.yahoo.com/news/why-stocks-may-keep-falling-140750592.html

Thursday, November 08, 2012

MARKET SELL OFF

Market selloff. APPL is off over 20% since it made highs at $705, you damn sure DO have to TIME the market....what does this all mean? Businesses do not like uncertainty, the certainty is 4 more years like we've had, maybe that is a problem...FISCAL CLIFF talk is that.....I think its in the soup...its something else..

I am not screaming chicken little, what I AM saying is there is a ton of complacency out there, the makret is overvalued, and things tend to recvert to the mean, which in past corrections is plain fact for those who bother to look or ask.

Not dividend yields nor PE ratio of the SPX 500 is anywhere near a true reckoning bottom, IMHO.

WTF do I know? just one dude talking here to myself?

D

POST ELECTION BLUES

http://seekingalpha.com/article/990091-so-much-for-certainty-explaining-yesterday-s-market-plunge?source=yahoo

Wednesday, November 07, 2012

KISS OFF

Interesting day AFTER? The market has been working UNDER the 50 DMA and has kissed off it several times.

Now the lower boundery (dashed line) and the 200 DMA are potential support and targets.

Possible rebound for a few days after this 300 pt loss.

D

VICTORY WILL BE BITTER SWEET

U.S. Futures Fall, Dollar Slips; Global Shares Gain After Obama Win

" World shares and gold rallied while the dollar fell and U.S. futures fell on Wednesday after President Barack Obama was re-elected for a second term, signaling no dramatic shift in U.S. economic policy."
 

Isn't this what the market wanted as it rose yesterday in anticipation of Obama victory? IMHO, was the victory ever in doubt with such a weak opponent?

This victory is a gift to the other party/s....there is nothing that can stop the deflationary debt deleveraging going on, it is not the 9th inning there, more like in the middle, most of the reductions in household debt have come from defaults on mortgages. A SPARK to set off a worse outcome would be...a RISE IN TAXATION, and a pronounced AUSTERITY move....not now...now is not the time for that. But with fiscal cliff talk...and now a TEFLON President with a mandate against "the rich" the JOB PRODUCERS....2013-2014 could turn mucho ugly, IMHO

CYCLE FORECAST

http://www.safehaven.com/print/27598/why-bernanke-cant-stop-the-kress-cycle-tsunami

Saturday, November 03, 2012

BLACK SWAN EVENTS

http://prudentbear.com/index.php/creditbubblebulletinview?art_id=10725

"Politicians, central bankers and governments are trapped in “do whatever it takes” late-cycle reflationary measures. You can bet on it. Many have. And the global Credit Bubble dynamic will ensure that the world remains short-sided and blind to myriad serious risks until it’s too late.

We’re today in the midst of the manic financial Bubble phase. Especially here in the U.S., the markets will finance virtually anything. There’s hardly a junk bond the market doesn’t love. CDOs are back. Relatively higher-yielding municipal debt induces salivation. There are, then, no worries regarding the ability to finance Sandy recovery and rebuilding efforts. Costs really don’t matter. 
Wealth destruction is basically irrelevant. If it’s “money” that’s needed, well, we’ve got the Bernanke Fed. And why not just rebuild on the water’s edge and buy cheap federal flood insurance. “Broken windows,” broken subways, broken transformers, broken communication hubs, and broken neighborhoods are sure to incite a borrowing and spending boom. Dr. Bernanke’s “mopping up” strategy in action."

Wednesday, October 31, 2012

QE IS FAILING, AND THEY KNOW IT

"QE falls into a black hole. And it leads into an - if possible even larger - black hole. Ben Bernanke and Mario Draghi have neither the power nor the tools to stop deleveraging and debt deflation. That's just a myth they, and many with them who stand to benefit from that myth, like you to continue believing. It makes it all that much easier for them. That surge in excess bank reserves (see the second graph above) comes from QE. It is your money, everyone's money. And it does nothing to "heal" the economy you live in and depend on for your survival; it just takes away more of it all the time."

http://theautomaticearth.com/Finance/us-hyperinflation-is-a-myth.html  A MUST READ, if you have ANY hope of understanding what is going on.

D

Saturday, October 27, 2012

FINANCIAL STORMS


you KNOW, it is a crying shame what the &**% THEY have done to the world, all in the name of *&%)! what?

 
Just like this mammoth storm coming Sandy, this (FINANCIAL STORM) will pass, but not before it carves out a path of destruction no one can imagine....then the skies will clear.

 
Our job is to somehow remain standing my friends!!

Friday, October 26, 2012

IS QE3 WORKING?

NEW YORK (CNNMoney) -- "The Federal Reserve announced plans to unleash more stimulus Thursday, in its third attempt at a controversial program to rev up the U.S. economy.
The policy, known as quantitative easing and often abbreviated as QE3, entails buying $40 billion in mortgage-backed securities each month. The end date remains up in the air, as the Fed will re-evaluate the strength of the economy in coming months."

The FED has launched QE3 to LOWER long term interest rates, which is what mortgage rates are based on.....why isn't it working?

D

Wednesday, October 24, 2012

QE IS FAILING

"QE falls into a black hole. And it leads into an - if possible even larger - black hole. Ben Bernanke and Mario Draghi have neither the power nor the tools to stop deleveraging and debt deflation. That's just a myth they, and many with them who stand to benefit from that myth, like you to continue believing. It makes it all that much easier for them."

http://theautomaticearth.com/Finance/us-hyperinflation-is-a-myth.html 

MBA HOME INDEX SLUMPS

"Applications for U.S. home mortgages fell sharply last week, registering the biggest percentage decline in a year as demand for both purchase loans and refinancings tumbled, data from an industry group showed on Wednesday."

http://www.cnbc.com/id/49530700

STOCK BULL IS TOPPING

http://www.zealllc.com/2012/bulltop.htm Adam Hamilton's Zeal

"The bottom line is the strong stock bull of recent years appears to be topping. It is long in the tooth, much older than average. It has also powered far higher than average, driving it up near bull-killing secular-bear resistance. And since stock-market valuations remain way too high to herald the end of this secular bear, it needs to reassert itself. And the recent topping behavior sure looks like this process is starting.


Cyclical bears within secular bears are not to be trifled with, as they mercilessly slash stock prices in half over a couple years or so. But not everything gets sucked into this selling. Gold actually becomes much more attractive during stock bears, an island of strength in a sea of weakness. And gold stocks generally follow gold higher, particularly earlier in stock bears before the selling grows more intense later on."

Monday, October 22, 2012

UNDERSTANDING SECULAR AND CYCLICAL TRENDS

http://www.safehaven.com/article/27379/stock-bull-topping

Now let's step back for a moment and try to get a grasp of what is going on and where we are WITHIN the SECULAR (long term) cycle. DO read the link to Adam Hamilton's article above.

This is a sideways GRIND, stocks are lower than they were 12 yeasr ago. We are long in the tooth for cyclical bull trend and near the 1500 topping zone. 2 X we have bottomed near 750 SPX the bottoming zone, where do YOU want to put money to work? Near the topping area? knowing the bull is 43 months old? YES that's what THEY want you to do.

ALL THE QE infinitty talk is to help establish that "stocks can't do down" and one FOOL on CNBCBS quipped "there will beno 200 pt declines", well he's a liar already.

OK, so if history means anything, we know that PE ratio is now at 19.8 (per Adam's piece), and we also know that SECULAR BEARS end between 6-7 PE ratio. IS this a good place to buy based on that?

Have we returned to some kind of norm? Is the economy reset? AS you can see from the 2 charts above, the CREDIT BUBBLE has barely begun to correct, or do you believe what happened in 1929-1950 won't repeat?

The move to our current CREDIT DEBT BUBBLE HIGH is far greater % wise than in 1929 and it has barely begun to adjust, retreat. If we are doing so well, if QE worked so well, why did the FED just call for QE 3 to infinity? WHAT imbalances are being aggrevated because of these actions?

A BELL may not go off, to warn you that the next phase of this SECULAR BEAR
 (usually lasting 16-17 years) has begun. OR maybe you think like some that history won't repeat and it will be different this time...you don't know JACK as they say....or JAck don't know squat...

We have the fiscal cliff ahead of us, we have Bush tax cuts probably ending, calls for Cuts in Federal spending, we still have the government debt growing at over $1 Trillion a year.....how will this all end?

Do we have a government debt bubble and will it burst? We better hope it doesn't burst, because we know we have one.

From DR MArc FAber
One day, the system would break, he said.
"Eventually you have either huge changes occurring in a peaceful fashion through reforms, or usually through revolutions," he said. The U.S. was getting closer to such a revolution, he said, as was Europe.
"I think the timeframe would be within five to ten years you have a colossal mess... everywhere in the Western world," Faber said.
"I think the deficit here (in the United States) - irrespective of who is in the White House - will stay above a trillion dollars per annum for at least as far as the eye can see," Faber said.

Bureaucracies in the U.S. as well as Europe were far too big, he said, and were a burden on the economy.
"My medicine for the U.S. is: reduce government by minimum 50 percent," he said. "The impact would be immediately an improvement in the economy."


D

Saturday, October 20, 2012

S&P 500 DIVIDEND YIELD

The 1.98% yield is one of the lowest yields on record, the lowest came in 2000 when the GREAT BULL MKT topped and the tech bubble burst.

SEE in 1980 how the rate was above 6%....the last GREAT BOTTOM, which set the stage for a 20 yr plus bull mkt.

D

LARGE CAP MULTI NATIONAL FIRMS MISSING ESTIMATES

http://news.yahoo.com/firm-dollar-weak-europe-crimp-u-industrials-sales-024016525--sector.html

HISTORY TENDS TO REPEAT ITSELF

http://prudentbear.com/index.php/creditbubblebulletinview?art_id=10721  Doug Noland's Credit Bubble Report 25th Anniversary (of the OCT 87 crash)

"The Nikkei ended 1989 at 38,916. The Nikkei closed Friday, some 23 years later, at 9,003."


"Especially after the ’87 Crash, the Federal Reserve and other regulators should have moved decisively to nip the derivatives boom in the bud, especially in the area of the dynamic hedging of myriad market risks. “Black Monday” provided unequivocal evidence of the serious flaws and dangers associated with the premise of “liquid and continuous” markets – an assumption that is really the foundation for contemporary derivative hedging strategies. Instead of the Crash destroying this market fallacy, the Fed’s day-after statement validated the view that derivative contracts could be written and risk-strategies pursued on the belief that policymakers would be there to counterbalance market illiquidity and neutralize “tail risks” and system shocks. "

"And the way I see it, the Fed, ECB and global central bankers today fight a losing battle. The mountain of global debt, securities, and derivatives, along with this destabilizing global pool of speculative finance, just inflate larger by the year – and after each policy response. "

My premise for this blog has and always will be to warn and educate.Some affable bobo's come by after each rally and proclaim how right they are, but after a market decline are noticeably quiet.

Each time there is a "CRISIS", the ECB and or the FED open the flood gates of liquidity, and easy money policy to "correct" the decline. All this has done is add more imbalances to an already overloaded unhealthy system that PUNISHED investment and  savings, and rewards speculation.

For 4 years now we have had a 0% interest rate policy, forcing MANY who otherwise would not do so, into RISK markets in search of yield. As long as there is a "greater fool" to pay higher prices this strategy will work in rewarding the risk taker. BUT at some point it will NO longer work and there will be nobody left to catch the falling knife.

After 2 horrendous BEAR MARKETS In the last 10 years, many would be investors have either left the market for good, or are still left in a state of shock even perhaps still holding their investments...as really there is little other strategy to take.

Where is it good, where variety isn't the spice of life, and choice taken away from investors limiting their options is the reality?

Current account debt keeps piling up at now over $16 TRILLION, this does not take into account some $50 T more in unfunded liabilities like medicaid and SS. WHAT politician is going to get elected or keep office telling the American people "Houston we have a problem" and somehow it will take the form of shared sacrifices and less opportunity for many years to come.

4 years of 0% FED funds rate, 3% 30 year mortgages and the Housing Market barely has a heartbeat, 25% of HOMEOWNERS are underwater in their mortgages. This is the FIRST recovery not to be led by housing, any wonder it doesn't feel like a recovery?


If printing money (digitally) was the answer and cure for all the ills, why would we EVER suffer an economic contraction and ever leave prosperity?



43 months of spectacular market gains have not led to historic recovery in housing, hiring, wages, investment ,spending and overall economic activity.

What feels like economic stability is more or less a mirage, being held up by FED POLICY and GOV'T spending and handouts. More Americans are receiving GOV'T assistance than ever before.....now if we had a true recovery would that be so?

That is life living under the specter of the ongoing credit bubble and its effects on our lives. AS Doug suggests, what has been growing in that aftermath of the bursting of the housing bubble is now a GOVERNMENT FINANCE BUBBLE....the "MOTHER" of all bubbles.

IS it possible that at some point, the US TREASURY auctions find few others takers than themselves or the FED?

D




Friday, October 19, 2012

CLOSEUP OF DECLINE

I'm very interested to see what action we get near SPX 1430.

D

Wednesday, October 17, 2012

MARKET ARTICLES OF INTEREST

http://www.marketwatch.com/story/qes-real-cost-dysfunctional-markets-2012-10-17?link=MW_story_investinginsight

"As Pimco’s Bill Gross wryly observed: “What a good country or a good squirrel should be doing is stashing away nuts for the winter. The United States is not only not saving nuts, it’s eating the ones left over from the last winter.”
http://www.marketwatch.com/story/debt-is-drowning-the-american-dream-2012-10-17?link=MW_story_investinginsight

INTC and IBM MISS send tech spending warning
http://www.bloomberg.com/news/2012-10-17/intel-slumps-with-ibm-on-weak-businesses-consumer-demand-tech.html?cmpid=yhoo

EBAY misses forcast, growth slows
http://www.bloomberg.com/news/2012-10-17/ebay-forecast-misses-estimates-as-growth-slows.html


Below is a more positive, butnot climactic chart that shows continued improvement in housing starts and permits....but it sure is still a FAR cry from normal isn't it?

Tuesday, October 16, 2012

MICHAEL BELKIN MARKET SAGE PREDICTS

http://live.wsj.com/video/michael-belkin-predicts-40-stock-market-drop/A1C9660A-0321-4E82-BA0E-EFD4CD092D40.html?link=MW_hp_tboverticalx8#!A1C9660A-0321-4E82-BA0E-EFD4CD092D40

Hey Mr Belkin agrees with me? I would listen to Belkin before I would some of the BAFOONS out there.

His Model has been pretty spot on, and his service is pricey at around $40,000 a year last I heard.

D

GROWING ECONOMY BY ADDING MORE DEBT, SIMPLE ANALOGY

Same as.....if I was in debt $100,000, and I borrowed another $100,000 I could use that to make payments on the $200,000 and buy more shit.

When that ran out, if lenders agreed, I would borrow another $100,000 to make payments on now $300,000 and buy more shit etc.

As long as I can keep doing this, the game continues.  But that doesn't alter the facts that I now owe $300,000 instead of $100,000 which means I will be paying forever, borrowed even more to keep going or default because I can never pay it back.


If my borrowing costs rise, I will then be making higher interest payments and have less left over to buy more shit.

US 10 yr rates below 1.7%...the norm is closer to 4-6%. The FED has pegged the rate banks can borrow at 0%, but that also means Savers get 0%.

TRILLIONS HAVE BEEN POURED into efforts to jolt economy, and here in the US we have declining GDP , growth rates which are now around 1.5%......so are we already in the influence of the debt "black hole" and no matter how much NEW MONEY is printed to pay off the OLD MONEY and see it trickle into economic activity, we have perversed the system....delay the inevitable correction....STIFLE investment and we get mediocre job creation.

FED SPOKE of QE3, butactually since then their balance sheet has declined.....

D

Monday, October 15, 2012

BLACK HOLE OF DEBT

https://www.mauldineconomics.com/frontlinethoughts

"I think we can draw a rough parallel between a black hole and our current global economic situation. (For physicists this will be a very rough parallel indeed, but work with me, please.) An economic bubble of any type, but especially a debt bubble, can be thought of as an incipient black hole. When the bubble collapses in upon itself, it creates its own black hole with an event horizon beyond which all traditional economic modeling breaks down. Any economic theory that does not attempt to transcend the event horizon associated with excessive debt will be incapable of offering a viable solution to an economic crisis. Even worse, it is likely that any proposed solution will make the crisis more severe."

Are we too close to thebalck hole of debt? Can we achieve excape velocity? I have my worries, doubts as out economy, the world has been subject to HISTORIC attempts to stimulate, and creation of money, yet we have meager historic worst recovery, and its not creating enough jobs.

By the FED monetizing the debt, have we fixed anything? ZERO % interest rates held for alreay 4 years, has that fixed anything? what it has done is make it impossible for savers to get any return. There are no choices, we have not deleveraged, we have not gone back to the NORM from where maybe we return to investment and real job growth.

D

Chinese data as clue

http://www.marketwatch.com/story/china-inflation-data-suggest-economy-unsettled-2012-10-15?siteid=yhoof2

Wednesday, October 10, 2012

NEAR TERM SPX ACTION


EARNINGS THUD

http://www.fool.com/investing/general/2012/10/10/markets-kick-off-earnings-season-with-a-thud.aspx

I don't need to call a top, not running around with my bear hair protruding out of my shirt like some mad crazed monkey.....I just report what I see and only hunt for the truth.....which you won't get in too many places.

D

Tuesday, October 09, 2012

BLATANT MANIPULATION?

"In a memorandum dated September 28, the White House Office of Management and Budget counseled defense employers not to issue layoff notices on November 1. OMB assured employers that if they did not send out layoff notices and layoffs occurred, the "contracting agency," namely the Pentagon, would absorb the penalties and attorneys' fees the employers would have to pay, a significant cost to taxpayers. If firms don't file WARN notices and plant closings or layoffs of more than 500 workers occur, employers are liable for penalties of 60 days back pay and benefits paid to workers.

No problem, says OMB in the memo, the contracting agency will pay the costs. It specified that if sequestration occurs and the contractor has followed Labor Department guidelines, "any resulting employee compensation costs for WARN Act liability as determined by a court, as well as attorneys' fees and other litigation costs (irrespective of litigation outcome), would qualify as allowable costs and be covered by the contracting agency, if reasonable and allowable."

It's not clear that the White House has the authority to offer to pay the costs. Nevertheless, defense companies, such as Lockheed Martin and Boeing, which were planning to send out notices to tens of thousands of workers, have announced that they will refrain. Blatant Manipulation This is clear manipulation by president Obama. That said, it would not affect the unemployment rate now. Nor is it a conspiracy. However, it was a cowardly act, one that certainly cannot inspire confidence in the president at all "

Read more at http://globaleconomicanalysis.blogspot.com/#T68rlac9e2QDIM5b.99

DEAD FISH

IMF ASESSMENT OF "BLEAK" GLOBAL RECOVERY

http://finance.yahoo.com/news/imf-offers-bleak-assessment-stalled-002236424.html

Sunday, October 07, 2012

GLOOMERS ARE WRONG

Are the Gloomers wrong as a recent comment left suggests? I never suggest TIMING the market, the trend for stock may still be UP, but I have been warning of underlying problems both fundamental and technical.

Currently the world markets are in the GRIP of FED and ECB actions, there is nothing subtle about it, they have taken away the vail of secrecy and have laid their cards on the table. The MAJOR players like PIMCO and large hedge funds are buying up SPanish bonds and all kinds of "risky" assets, in defiance to the underlying issues, as in as near a guarantee as they can muster, both FED and ECB say buy we got your back.

Speculation is being telegraphed, supported, almost guaranteed in an effort to avoid IMPLOSION. It will, has worked for awhile, but I don't think this will be open ended.....manipulation always comes with unintended consequences.

ECRI has said we are in a Recession, that economic data suggests a firm slowing down of economies.

There is a year long NON CONFIRMATION DOW THEORY in place, the Transports have not since 2011 confirmed the new highs in the Dow and SPX. As Tim Wood recently pointed out in an essay published on SafeHaven, Dow Theory Non CONFIRMATIONS are WARNINGS OF TROUBLE AHEAD, NOT TIMING TOOLS FOR SPECULATION.

Did I say trouble was brewing 6 months ago? probably so. And it IS, IMHO. That doesn't mean the market will crash a day later.

IMHO we are further apart from the actual economic reality compared to stock valuations. WHEN markets are manipulated this will happen. But for EVERY BUBBLE.....there comes a POP....and when they BURST it usually gets ugly, that I want to avoid.

This is a dangerous game of musical chairs we are playing...

D

Saturday, October 06, 2012

IS THE DOW HEADED FOR NEW ALL TIME HIGHS?

If this pattern is still alive, as it appears it is, that is certainly a possibility. There is no crime in having been long during this cyclical bull market, that appears may have another leg left.

This pattern is call a Broadening megaphone, and after it completes is Bearish, that is well above where price is today.

Is the current FED policy of no options for returns enough to keep money flowing into stocks and keeping volitility low?

Is the job market gaining momentum? Friends, it may be that none of this matters, all that matters is the people who can move the markets, believe there is no worries of a serious decline at this time.

I can say to you , well maybe this is not for me.....but I try to present all possibilities. This does NOT change my view of how it all ends, BADLY. But sometimes you have to take what they give you, and since 2009 they been giving a lot.

43 months into this CYCLICAL BULL means it may be running on borrowed time. Tops seldom give out shouts to get out, and take time to form....no guarantee history repeats.

Whether Transports ever confirm the new Dow high in the short run won't matter, but it does certainly give a warning, should that divergence continue that something is wrong and buyer beware.

D

Friday, October 05, 2012

DEVIL IN THE DETAILS


**This was from last months report**(8.1 from 8.3% http://www.briefing.com/Investor/Calendars/Economic/Releases/employ.htm

 

Unfortunately, the drop in the unemployment rate was the result of a sizable drop in the labor force participation rate (from 63.7% to 63.5%).

That rate is the lowest since September 1981.

Read more: http://www.briefing.com/Investor/Calendars/Economic/Releases/employ.htm#ixzz28QfJaenF
 
Todat's report, given the LOW #'s reported in the jobs data....seeing a drop from 8.1% to 7.8% is rather dramatic on the surface until you read above, same thing must have happened this month but even greater numbers giving up. And stocks near new highs.....WHAT a disconnect!

"The job market has been improving, sluggishly but steadily. Jobs have been added for 24 straight months. There are now 325,000 more than when Obama took office.
The September gains were led by the health care industry, which added 44,000 jobs — the most since February. Transportation and warehousing also showed large gains. The revisions showed that governments actually added 63,000 jobs in July and August, compared with earlier estimates that showed losses. Still, many of the jobs added last month were part time. The number of people with part-time jobs who wanted full-time work rose 7.5 percent to 8.6 million."
 
D

 

 

Saturday, September 29, 2012

10 WAYS TO SUNDAY LOOKING AT DEBT

http://www.financialsense.com/contributors/ronald-griess/balance-sheet-household-credit-market-debt

Deleveraging...returning to norm hasn't barely begun.

D

PROBLEMS WITH STUDENT LOANS?

"We give Bernanke at most 2 years before everyone is aware of the true extent of not only the student debt bubble, but that it has already popped, at which point student loans will be the next "asset" to be monetized by the Federal Reserve. "

http://www.zerohedge.com/news/2012-09-28/next-subprime-crisis-here-over-120-billion-federal-student-loans-default

Wednesday, September 26, 2012

PEAK PROFITS?

http://www.mauldineconomics.com/outsidethebox  "What if the FED has it all wrong?"

" Today, employment growth remains below 1.5% YoY, a rate insufficient to reduce unemployment. Nominal wages are growing 1.2% while inflation is 1.7% and threatens to accelerate, in large part due to the impact that the Fed's actions are having on commodity prices, particularly oil prices.

The Fed wants to grow employment faster, but jobs don't grow out of thin air. Corporations create jobs when they have the means, they see a need, and there is visibility to commit.

The problem with Bernanke's wealth effect thesis lies with the new reality in America. Income and assets have lately been so significantly redistributed that only a tiny few actually feel a wealth effect from rising equity prices. "

Today on CNBCBS, "expert" came on ans basically said only worry is some short term turbulence, but longer term NO PROBLEMS as the FED has put a price under market and that we "won't see ANY 200 pt delines as long as FED is there.

All the traders know the FED IS THERE, and maybe this guy is right. But I ask the question, where is it in the FED mandate they target the stock market?

There is a YING and and YANG to everything, and it seems obvious to me, the FED policy for what it is costing, is VERY INEFFECTIVE in helping their #1, and #2 mandates.....full employment and price stability as it also relates to the protection of the reserve currency.

Props to Richard Russell http://ww2.dowtheoryletters.com/dtlol.nsf who is still writing one of the best letters available, especially for the layman, and is going strong well into his 80's. If there was a HALL OF FAME for this, he surely would be there.

D

Monday, September 24, 2012

A Chartists Perspective on DOW THEORY NON CONFIRM

http://www.pretzelcharts.com/2012/09/dow-theory-gives-warning-can-fed-print.html

FED RICHARD FISHER SPEAKS


http://www.dallasfed.org/news/speeches/fisher/2012/fs120919.cfm  SEPT 19th

"We can easily conjure up plausible theories as to what we will do when it comes to our next tack or eventually reversing course. The truth, however, is that nobody on the committee, nor on our staffs at the Board of Governors and the 12 Banks, really knows what is holding back the economy. Nobody really knows what will work to get the economy back on course. And nobody—in fact, no central bank anywhere on the planet—has the experience of successfully navigating a return home from the place in which we now find ourselves. No central bank—not, at least, the Federal Reserve—has ever been on this cruise before."

"This much we do know: Our engine room is already flush with $1.6 trillion in excess private bank reserves owned by the banking sector and held by the 12 Federal Reserve Banks. Trillions more are sitting on the sidelines in corporate coffers. On top of all that, a significant amount of underemployed cash—or fuel for investment—is burning a hole in the pockets of money market funds and other non depository financial operators. This begs the question: Why would the Fed provision to shovel billions in additional liquidity into the economy’s boiler when so much is presently lying fallow?"

The FED's MANDATE:
"As you all know, the Federal Reserve’s mission is mandated by the Congress. It calls for us to steer a monetary course according to a dual mandate—we are charged with maintaining price stability while conducting policy so as to best assist in achieving full employment."

"In the current tumultuous economic sea, facing strong headwinds common in the aftermath of financial crises and balance-sheet recessions, our desired port is increased employment. Certain theories and various hypothetical studies and models tell us that flooding the markets with copious amounts of cheap, plentiful liquidity will lift final demand, both through the “wealth effect” channel and by directly stimulating businesses to expand and hire. And yet from the perspective of my watch station—as I have reported time and again—the very people we wish to stoke consumption and final demand by creating jobs and expanding business fixed investment are not responding to our policy initiatives as well as theory might suggest."

"Surveys of small and medium-size businesses, the wellsprings of job creation, are telling us that nine out of 10 of those businesses are either not interested in borrowing or have no problem accessing cheap financing if they want it. The National Federation of Independent Business (NFIB), for example, makes clear that monetary policy is not on its members’ radar screen of concerns, except that it raises fear among some of future inflationary consequences; the principal concern of the randomly sampled small businesses surveyed by the NFIB is with regulatory and fiscal uncertainty."   "“If your costs of borrowing were to decrease by 25 or more basis points, would this induce you to spend more on job-creating expansion?” The answer from nine out of 10 was No.”

"To be sure, buying in stock will have a positive wealth effect on that company’s shareholders, but putting the equivalent amount of money to work in spending on plant and equipment would put more people back to work more quickly."

Bottom line is, from the FED's horses mouth, current FED policy is not having the desired effect on business, but yet they just announced a scaling up of QE to another new level of historical insanity....as they have PROOF it's not working, not aiding business borrow nor investment...but they keep piling on!

And Fisher also points out, from these uncertain, uncharted waters Bernanke has swam us into.....there is NO SURE WAY TO GET OUT!

D


Sunday, September 23, 2012

NEW ERA OF GROWTH AND PROSPERITY?

Exhibit A http://prudentbear.com/index.php/creditbubblebulletinview?art_id=10709

"Deleveraging – the process of unwinding the economic damage wrought from years of excess - will be a quite arduous economic process; one that will commence at some unknown date in the future. Oh, I guess I failed to mention that total (financial and non-financial) Credit ended Q2 at a record $55.031 TN, or 353% of GDP. And Rest of World holdings of our financial assets ended the quarter at a record $19.100 TN, a $3.860 TN increase from the end of 2008. "

Exhibit B

http://www.mauldineconomics.com/frontlinethoughts?utm_source=newsletter&utm_medium=email&utm_campaign=frontline

"In 2010, the number of Federal Register pages devoted to proposed new rules broke its previous all-time record for the second consecutive year. It's up by 25% compared to 2008. These regulations alone will impose large costs and create heightened uncertainty for business and especially small business."

So we have world Central Bankers printing money like there's no tomorrow, and it is the OPINION of many letter writers that YOU "have to be in stocks for long term...." BUY NOW AND BUY OFTEN!


It is hard to argue the success of current policies for inflating Risky assets. But the whole idea of Bear Markets and periods of reconciliation are that the preceding excesses are cleansed and we acan start anew, REAL GROWTH, a REAL ECONOMY.

Is it any wonder, while some who come here and post how great the stock mkt is, how I'm missing the boat, is that THEY are missing the point of my blog.....the greater risk IMHO is not understanding the greater issues and what might their impact be at some point.

I can't predict THE TOP or when the TIPPING POINT will arrive, what I am saying is current policies are aimed at one sector, STOCK PRICES, and a WHOLE LOT OF AMMO has been used to gain higher prices, but what has been the EFFECT on the overall economy?

Higher spending, consumption.....and a LOT of it is Gov't, but stock prices back to near record highs has increased Household wealth. Housing prices had been a more stable storehouse for personal wealth until the BUBBLE....again created by reckless FED policy of unusually LOW Interest rates held low for TOO LONG, in the face of OBVIOUS price speculation that only after the crash was anyone complaining.

ALL this money thrown at the core problems? Is creating even MORE and larger dysfunction, and total credit market debt is still near 350% of GDP....for now the DAY OF RECKONING has been pushed back.......looking at these 2 charts, especially the one showing debt in 1929 (we know what happened next) and where we are standing today......DO NOT LOOK DOWN!

Duratek